Alberta to give temporary break to some producers on oil cuts

VANCOUVER/WINNIPEG, Manitoba (Reuters) - Alberta is offering temporary flexibility to some oil producers on mandated production cuts, as the Western Canadian province reviews their claims that curtailment levels are unfairly high for some and pose technical and safety concerns for certain projects.

The oil-rich province took the unusual step this month of mandating temporary production cuts amounting to 325,000 barrels per day (bpd), or 8.7 percent, starting in January to deal with a glut in storage and sagging prices.

A shortage of pipeline space has caused the build-up.

The temporary reprieve comes after a “small number” of operators expressed concerns that their curtailment levels could be “significantly higher than anticipated,” potentially causing technical issues, according to a Dec. 11 letter to industry from Alberta’s senior assistant deputy energy minister, Mike Ekelund.

The letter states that as the government has not had time to assess the claims, it would make a temporary adjustment to January production limits for operators facing higher curtailments.

Alberta has established a panel through the provincial energy regulator to assess company claims, a government spokeswoman said, with formal decisions expected ahead of the province notifying producers of February cuts.

“The temporary adjustment applies to all operators whose production limit, as initially established, was more than 16 per cent below their October 2018 production amount,” Ekelund wrote in the letter.

A spokesman for Husky Energy said the curtailment level it was given for January was more than double the 8.7 percent target, due to it expanding production in late 2018 at two projects.

Alberta also exempts companies producing less than 10,000 bpd “so larger producers like ourselves have to shoulder more of the curtailment to get to the 325,000 barrels,” said Husky spokesman Mel Duvall.

Reporting by Julie Gordon in Vancouver and Rod Nickel in Winnipeg; Editing by Sandra Maler